Attorney at Law Magazine Phoenix - Vol 5 No 7

TAX LAW

Steve Newmark 2013-07-16 23:52:15

2013 Arizona Tax Legislation of Interest
A certified tax specialist since 1991, Steve Newmark is a highly respected and experienced lawyer who practices in three legal fields: state and local taxation, estate planning and probate.Newmark has been a member of the Arizona Bar since 1977 and served as chair of the state bar tax section.Newmark is certified as a tax specialist by the Arizona Bar. For more information call (602) 274-7552 or visit www.newmarklawfirm.com.
our friends in the Legislature nibbled at the edges of existing state tax law in the recently concluded 2013 regular legislative session. Fortunately, no major changes were made, mostly because no major changes are needed.
One of the changes, HB 2111, entered the legislature as a lion and left as a lamb. The original intent was to replace the longstanding sales tax on contracting with a sales tax on construction materials. The idea is an interesting one, but the fiscal impact of the proposed change was never adequately quantified, nor was sufficient thought given to how to transition from taxing contractors to taxing construction material vendors. Sadly, consideration of HB 2111 devolved into a state versus municipality turf war that largely ignored the interests of Arizona taxpayers.
When it finally passed, HB 2111 was given the moniker “tax simplification bill,” a nickname that is wholly misleading. The reason it is misleading is that the bill does not simplify any tax. Instead, it adjusts tax licensing and return filing practices by giving more authority to the Arizona Department of Revenue and eliminating the beneficial one-on-one relationship taxpayers have developed over the years with local taxing authorities.
Perhaps change is necessary, but HB 2111 misses the mark. It fails to “make a significant contribution that completely changes the landscape in which businesses operate,” or “provide a much needed overhaul to an over burdensome tax system,” or “create a better economic development climate [that] will benefit Arizona’s businesses for decades to come.” These glowing statements appear in the 2013 Legislative Summary published by the Arizona Small Business Association, of which I am proud to be a member. Hopefully, the legislature in 2014 will revisit HB 2011 and rework it so the laudable goals expressed by the ASBA are met.
Another tax law change is a good one. Leases of commercial real property between affiliated entities have long been exempt from sales tax. However, because the exemption as written defines affiliation based on common ownership of stock, it has been unclear whether the exemption applies to limited liability companies, limited partnerships and other business organizations that do not issue stock. In HB 2324, the legislature expands the definition of affiliation to include entities that do not issue stock. This change takes effect around October 2013.
Lastly, in HB 2336, the legislature added an exemption under the sales tax retail classification for “cash equivalents” purchased from retailers. Cash equivalents are gift cards, vouchers, money orders and traveler’s checks. Although, under the new exemption, no sales tax is due when a cash equivalent is sold, the tax is due when the cash equivalent is used to purchase an item of tangible personal property.
If you have questions or concerns, please contact me.